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Best Places For Real Estate Investment In Sub-Saharan Africa

Best Places For Real Estate Investment In Sub-Saharan Africa

Commercial real estate investors in Africa can earn 25-percent-plus annual returns, but only after negotiating unexpected hurdles such as unreliable local developers, poor urban planning and unfinished infrastructure, VenturesAfrica reports.

The lion’s share of shopping malls can be found in South Africa — home to 21 million square meters out of a total 23 million square meters in sub-Saharan Africa, according to VenturesAfrica.

Similar proportions can be found in the office space subsector. South Africa has 15-million square meters of office space. The rest of sub-Saharan Africa has 2-million square meters while North Africa, by comparison, has 4-million square meters of office space, VenturesAfrica reports.

Investors approaching the continent often navigate a blank slate when it comes to real estate, according to the report. If you can stomach the risk and find the right partners, these five countries outside South Africa offer the greatest opportunity:

Angola

The growing middle and upper class in Luanda make Angola an attractive hub for commercial real estate investors, but oil-rich Angola is often lost in the discussion of burgeoning economies. Global companies are flocking to the country to capture a piece of the consumer market as oil prices stay high. Data on office space is opaque but
local developers estimate that rent for prime office space goes as high $100 per square meter.

New malls with luxury occupants include the Sky Gallery, scheduled to open in June, with brands including Prada, Armani, and Gucci. Once the mall reaches full occupation, the total cost of the project could exceed $85 million. Investors warn, however, that such success stories should not obscure the true challenge in Angola: finding a dependable and capable
developer who can navigate the country’s unclear property laws.


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Ghana

Rent for prime office space in Ghana goes as high as $50 per square meter but it’s malls — not office space — that have real estate investors giddy, the report says. One mall — the Accra Mall — dominates the discussion in Ghana. It attracts almost 4 million visitors per year, and is so busy that locals suggest carpooling there on weekends as parking is limited.

The West Hills Mall, scheduled for completion by the end of 2014, may relieve
congestion at the Accra Mall. But, if real estate investors are only partly correct in their projections, both malls will be bedlam on the weekends and a third
mall is needed.

Kenya

Kenya may not experience South Africa’s mall growth, but it is starting to hit a
similar trajectory, VenturesAfrica reports. Economic growth bodes well for the long term as the country finds its footing again after the Westgate Mall terror attack. Office space supply will exceed demand by 2016, according to a report in Kenya’s the Star. One local investor said building malls surpasses office space for investor profitability based on Kenyan spending and returns per year.

Tanzania

Tanzania’s real estate landscape is changing along with its global reputation, boosted by offshore natural gas and a growing middle class. Yet hotel supply barely met demand when U.S. President Barack Obama toured the country in 2013. The situation is expected to deteriorate as the gas comes out of the ground, VenturesAfrica reports.

Prime office space rents as high as $45 per square meter and new businesses are arriving, so expect the price to increase. Executive apartments and condos rent out as high as $8,000 per month. Rapid urbanization in Dar es Salaam and improved infrastructure is gradually creating fertile ground for commercial property. Local investors predict a boon soon in a highrise commercial headquarters and multi-story malls.

Nigeria

On the surface, Nigeria is the real estate investor’s dream canvass, VenturesAfrica reports. Its 170 million-plus people love to shop and consume. As companies flood the market, office space is lacking. Prime office space rents as high as $85 a square meter, according to local renters.

The Ikeja City Mall, a 28,522-square-meter mall in Lagos backed by London-based private equity firm Actis in 2011, was unofficially the second mall in Nigeria. Numerous other malls have opened since. A recent boon in commercial space may not meet growing demand.

Still, investors must approach with Nigeria caution, VenturesAfrica reports. Corruption and regulatory ordeals come without warning. A strong local partner is necessary.